Should You Continue to Hold LKQ Corporation (LKQ)?

Artisan Partners, an investment management company, released its “Artisan Mid Cap Value Fund” second-quarter 2025 investor letter. A copy of the letter can be downloaded here. In the quarter, the fund’s Investor Class fund ARTQX returned 0.26%, Advisor Class fund APDQX posted a return of 0.26%, and Institutional Class fund APHQX returned 0.33%, compared to a 5.35% return for the Russell Midcap Value Index. Equity markets experienced heightened volatility followed by the announcement and subsequent pause of the so-called “Liberation Day” tariffs. The portfolio underperformed in the quarter due to the market’s preference for growth and the outperformance of more cyclical sectors and industries. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its second-quarter 2025 investor letter, Artisan Mid Cap Value Fund highlighted stocks such as LKQ Corporation (NASDAQ:LKQ). LKQ Corporation (NASDAQ:LKQ) distributes vehicle products and parts to repair, maintain, and accessorize automobiles. The one-month return of LKQ Corporation (NASDAQ:LKQ) was 9.43%, and its shares lost 22.46% of their value over the last 52 weeks. On August 28, 2025, LKQ Corporation (NASDAQ:LKQ) stock closed at $32.25 per share, with a market capitalization of $8.298 billion.

Artisan Mid Cap Value Fund stated the following regarding LKQ Corporation (NASDAQ:LKQ) in its second quarter 2025 investor letter:

“Other key detractors were Lineage and LKQ Corporation (NASDAQ:LKQ). LKQ is the dominant player in salvage/aftermarket collision parts distribution in North America, with over 70% market share. Shares pulled back, perhaps due to investors favoring cyclicals. The stock is roughly flat year to date. End markets remain soft as repairable claims have been held back by higher total loss frequency and consumers forgoing repairs due to inflationary pressures. Tariff fears are also in the mix. However, LKQ’s management believes it can mitigate tariffs through a combination of negotiating with suppliers, passing through pricing and relocating supply chains. At a 10X P/E (next 12 months), shares trade at a distinct discount to their historical 10-year average of around 14Xandarealso cheaper relative to LKQ’s auto parts retailer peers, which arguably have similar long-term growth profiles. LKQ is not a fast-growing business, but we believe it can grow 2% to 4%, and given its dominant market share and mid-teens return on tangible capital, we believe it should trade at a higher valuation. LKQ reliably generates free cash flow and operates in end markets with limited cyclicality as 90% of revenues are from non-discretionary spending. The company meets our requirement for a sound financial condition as its debt load is manageable at 2X EBITDA due to its attractive free cash flow.”

In another article, we covered LKQ Corporation (NASDAQ:LKQ) and shared the list of deep value stocks to buy according to analysts. In addition, please check out our hedge fund investor letters Q2 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.